Target store price tag too big for some

Supporters of the deal that will bring a Target store to town say it outweighs the price the city will pay.

Mike Wiser

Supporters of the deal that will bring a Target store to town say it outweighs the price the city will pay.

Mayor Randy Kirichkow panned the deal, saying it was simply too much to give away.

After the state, county and the developer get their respective cuts, he said, South Beloit may get nothing.

But South Beloit City Council approved it last week, giving the developer hundreds of thousands of dollars in sales-tax receipts before the city gets its share.

Commissioner Pam Clifton says the giant retailer will act as a catalyst for other businesses — and city coffers will fill accordingly.

“I think this will spur growth in the area,” she said. “There are already two gas stations out there, and we’ll get more motor fuel tax funds because more people will use them. Once Target comes in, others will want to come in, too.”

Until last week, the city and developer Oakfield Development — which owns the land where a retail strip anchored by Target will develop — had a deal in which the city would collect the first $350,000 of an estimated $400,000 in sales taxes each year — plus another 55 percent. The developer would receive the remaining 45 percent.

But Oakfield quit the project, leaving Houston-based Weingarten Realty Investors to take over. And it wanted a richer incentive.

Under the new deal, Weingarten gets the first $375,000 in sales-tax receipts for the next 25 years. It also promised to build an additional 73,000 square feet in retail space on the site.

Target, said Oakfield Development’s Dan Baumann, didn’t want a stand-alone franchise. It wanted to be the anchor of a development. And if Target couldn’t get assurances that there would be additional retailers, he said, the retail powerhouse might look elsewhere.

“We just didn’t have the connections to other retail outlets that a company like Weingarten does and, because of their connections, they were better suited to take the project from here,” he said.

Baumann told commissioners that if the project stayed with Oakfield, it could have been delayed.

That worried Clifton.

“If the project was going to be delayed until 2009 or 2010, who’s to say (Target) would still be interested in South Beloit?” she said.

“It’s not a fear, it’s a reality. We’re looking at the (Illinois) 173 interchange and what’s going on there. Target could have picked there.”

Indeed, when news first arrived in 2005 that Target was looking at the area, the retailer let on that South Beloit, Roscoe and Beloit, Wis., were all in the mix.

“They were trying to deal with everyone at the same time, and South Beloit made it clear that they were willing to give a lot to get them,” said Ward Sterett, who was Roscoe’s village president when Target started looking.

“We had two different spots but the developers couldn’t get clear title to the land in the time frame Target wanted it. South Beloit moved really fast. They let it be known they were ready to deal.”

He said incentive packages for Target never made it to the village board level in Roscoe.

Beloit City Manager Larry Arft said there were some discussions about the store locating near I-90 and Milwaukee Road where other big boxes, like Wal-Mart, have gone. But, he said, the land acquisition didn’t work out.

“The problem is that if (developers) don’t get what they want, they can get out,” said Norman Walzer, a professor with Western Illinois University’s Institute of Rural Affairs.
Small towns are often at the mercy of developers, who shop around for the best deals, he said.

“That’s particularly true in places like South Beloit, which is on the fringes of a metropolitan area. The developer can move across the street,” Walzer said. “It’s not so true in a stand-alone town, like, say, a Freeport.”

Arft said he’s used to seeing villages, towns and cities competing for potential developments.

“If you’re in a relatively weak retail market, the cities make the deals that they can,” Arft said. “In a strong market, like a Schaumburg, you don’t get (big incentive packages) as much.”

Still, sometimes an incentive package is seen as too rich.

“The sales tax is all going to go to the state,” Kirichkow said. “The state takes its 5 percent. The county gets its 1¼ percent and we have 1 percent. But we have to cut a check of the first $375,000 we take to the developers. So if you have $35 million in sales out there, the city gets nothing. If you have $40 million, we’re looking at $25,000, maybe, for the year.”

Kirichkow said he proposed an alternate plan, in which the city and the developers would split sales taxes 50-50, but that didn’t go anywhere.

“Sure, we gave up a lot, but I’m looking at the impact overall for the city,” Commissioner Bob Redieske said. He, like Clifton, thinks the project will benefit South Beloit in other ways.

“This thing is going to affect the next six city councils,” Kirichkow said.

“You can see that 10 years down the line, when they’re shelling out $375,000 a year to Weingarten or whoever owns it then, that they’re going to ask, ‘Who the heck put this thing together for 25 years?’”

Staff writer Mike Wiser can be reached at 815-987-1377 or mwiser@rrstar.com.

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